RAMSEY COUNTY A Memoir: Jimmy Griffin Remembers His Years on the Force A Publication o f the Ramsey County Historical Society Page 13 Volume 36, Number 4

Crises and Panics and Mergers and Failures St. Paul’s Banks and How They Survived 75 Years

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The Merchants Bank building under construction at 333 North Robert Street in 1914. Photo from the Minnesota Historical Society. See article beginning on page 4. RAMSEY COUNTY HISTORY Executive Director Priscilla Famham Editor Virginia Brainard Kunz

RAMSEY COUNTY HISTORICAL SOCIETY Volume 36, Number 4 Winter, 2002 BOARD OF DIRECTORS Howard M. Guthmann Chair CONTENTS James Russell 3 Letters President 4 Crises and Panics and Mergers and Failures Marlene Marschall First Vice President St. Paul’s Banks and How They Survived Ronald J. Zweber Their First 75 Years Second Vice President G. Richard Slade Richard A. Wilhoit Secretary 13 A Memoir Peter K. Butler Jimmy Griffin, St. Paul’s First Black Deputy Treasurer Police Chief, Remembers His Years on the Force Charles L. Bathke, W. Andrew Boss, Peter K. Butler, Norbert Conzemius, Anne Cowie, Char­ Jimmy Griffin with Kwame JC McDonald lotte H. Drake, Joanne A. Englund, Robert F. 19 Tubal Cain in New Brighton Garland, John M. Harens, Scott Hutton, Judith Frost Lewis, John M. Lindley, George A. Mairs, The Harris Forge and Rolling Mill Company Richard T. Murphy, Sr., Richard Nicholson, Leo J. Harris Linda Owen, Marvin J. Pertzik, Glenn Wiessner, Laurie Zenner, Ronald J. Zweber. 24 Who Was the Charles E. Flandrau Who Built That House? EDITORIAL BOARD 25 Books John M. Lindley, chair; James B. Bell, Henry Blodgett, Thomas H. Boyd, Thomas C. Buckley, Mark Eisenschenk, Pat Hart, Thomas J. Kelley, Publication of Ramsey County History is supported in part by a gift from Tom Mega, Laurie Murphy, Richard H. Nichol­ Clara M. Claussen and Frieda H. Claussen in memory of Henry H. Cowie, Jr. son, Paul R. Nelson, G. Richard Slade. and by a contribution from the late Reuel D. Harmon HONORARY ADVISORY BOARD Elmer L. Andersen, Olivia I. Dodge, Charlton Dietz, William Finney, William Fallon, Otis Godfrey, Jr., Robert S. Hess, D. W. “Don” Larson, George Latimer, Joseph S. Micallef, Robert Mirick, Marvin J. Pertzik, J. Jerome Plunkett, James Reagan, Rosalie E. Wahl, Donald D. Wozniak. A Message from the Editorial Board n this issue Richard Slade, a former St. Paul bank executive who’s also an historian of Twin RAMSEY COUNTY COMMISSIONERS ICities banking, examines the first seventy-five years of St. Paul’s banks. Slade’s primary focus Commissioner James McDonough, chairman is on the events and maneuvers during the 1920s that led to the formation in early 1929 of the Commissioner Susan Haigh “Minnesota Twins”—Northwest Bancorporation in Minneapolis and the First Bank Stock Group Commissioner Tony Bennett in St. Paul. During the decade of the 1920s, Minnesota banking experienced significant problems Commissioner Rafael Ortega Commissioner Victoria Reinhardt that led to numerous bank failures before the collapse of the New York Stock Exchange in the fall Commissioner Janice Rettman of 1929. As Slade explains, Minnesota’s banking problems of the 1920s produced a “combina­ Commissioner Jan Wiessner tion of enlightened self-interest and fear” that gave rise to the idea of creating a bank holding Paul Kirkwold, manager, Ramsey County company as an institutional bulwark against the growing economical and financial uncertainties of the times. Ramsey County History is published quar­ The Ramsey County Historical Society is also pleased to reprint in this issue an excerpt from terly by the Ramsey County Historical Jimmy Griffin: A Son o f Rondo, A Memoir. In the selection reproduced here, Griffin recounts Society, 323 Landmark Center, 75 W. Fifth some of his experiences as an African American rejoining the St. Paul police force in 1946, fol­ Street, St. Paul, Minn. 55102 (651-222- lowing his wartime service in the U.S. Navy. This firsthand account tells without editorializing of 0701). Printed in U.S.A. Copyright, 2002, Ramsey County Historical Society. ISSN the racism of that era, Griffin’s effectiveness as an officer and his unflinching determination to Number 0485-9758. AU rights reserved. No make his way on the force on the merits of his performance on the job. part of this publication may be reprinted This issue concludes with another piece of family history from Leo Harris, a local lawyer and or otherwise reproduced without written historian. In a carefully researched account of his family’s iron business, the Harris Forge and perm ission from the publisher. The Soci­ Rolling Mill Company, in New Brighton in the 1880s and ’90s, Harris gives us a glimpse of the ety assumes no responsibility for statements efforts of a small manufacturing firm to prosper in a rural community on the fringe of St. Paul. made by contributors. Fax 651-223-8539; Despite careful management and a ready market for its iron bar, fire twice destroyed the firm’s e-mail address [email protected].; web site plant and in 1893 doomed the business, bringing hard times to the Harris family and the commu­ address www.rchs.com nity of New Brighton. John M. Lindley, Chair, Editorial Board

2 RAMSEY COUNTY HISTORY Crises and Panics and Mergers and Failures St. Paul’s Struggling Banks and How They Survived Their

G. Richard Slade

ne of the first small group of struggling banking houses opening for business his dream—to build and run a successful in frontier Minnesota was Parker Paine & Company, whose doors Paine transcontinental railroad. Hill was a per­ Oopened in St. Paul in 1853. Parker Paine & Company would not be the only sonal and corporate client of the First one of this handful of financial institutions to survive; it also would turn out to be the National; since 1880 he had been a primary ancestor of the future First National Bank of St. Paul, thus a parent of the small shareholder in the bank and he en­ First Bank System and through it to today’s US Bancorporation. The path along the joyed his service on the bank’s board of 150 years of Minnesota banking history was not always smooth or level, with an in­ directors. teresting cast of characters along the way—including the ubiquitous James J. Hill and When Hill stepped down from the his descendants. Let’s take a look at the early part of this history, and particularly the chairmanship of the Great Northern’s evolution of the First National Bank of St. Paul up to the 1929 founding of the First board and retired from the day-to-day operations of the railroad in 1912, he In 1859, two brothers named Thomp­ turned his mind to the banking industry son moved to town from Americus, as an extended and essential part of his Georgia, bringing new capital and an in­ grand dream of “building the territory.” terest in investing it in the banking world. This dream evinced itself in many ways, They approached Parker Paine, and soon the intent being to enrich the economic the venture was renamed Thompson, and agricultural capacity of the regions Paine & Company. By 1861, Paine had his railroad served in order to build two- moved on; the business became Thomp­ way traffic. Symptoms of this compre­ son Brothers for a short time, then was hensive interest were his efforts at his rechartered as the Bank of Minnesota. In North Oaks farm to develop cattle and 1863, the Thompsons applied for—and grain varieties that might thrive on the were granted—a national charter and an­ vast prairie. To Hill, banking services other new name, the First National Bank were certainly a necessary part of an ef­ of St. Paul. James E. Thompson became fective working business system, and, the first president of the newly chartered with this in mind, he had designed bank, serving until 1870; then he was space for banking offices in the newly- succeeded by his brother Horace who constructed railroad headquarters build­ presided until 1880 when Henry P. Upham ing in St. Paul. In any event, Hill went to was elected to the position. Everett Bailey, president of First Na­ The Thompsons continued to be a tional Bank, and offered to buy the part of the St. Paul business scene, ulti­ H enry P. Upham bank’s outstanding shares. To his sur­ mately purchasing the Gokey Company. prise, he was turned down. The bank Upham, who was well regarded for his was not for sale, said Bailey, and it prob- T conservative management style, steered ably would be too expensive for Hill. the small bank through a number of re­ Undaunted, Hill went down the street gional and national financial crises. In Jim Hill, Banker to the smaller but well regarded Second 1881 James J. Hill was invited to join the Jim Hill was a ubiquitous and epony­ National Bank of St. Paul and called on board of directors, and this meant that mous presence in the Twin Cities from his old friend, William B. Dean, the act­ over time the First National would have the 1880s, when his “great adventure” ing president. The Second National Bank most of the regional railroad business. of driving the Great Northern Railroad was smaller than the First, but it too Upham was not an aggressive banker, to the Pacific Ocean began to flourish, could trace its roots back to 1853 when it but in those days, the conservative ap­ until his death in 1916. Hill was noted as had been founded under the name of proach often was not only wiser but also a strong, honest, and opinionated man Mackubin and Edgerton. It was chartered essential to survival. who worked hard on the realization of as the Second National Bank in 1859 and

4 RAMSEY COUNTY HISTORY Other Banks in St. Paul their bank was struggling and they acted There were, of course, other banks in swiftly to install new management. Ken­ frontier St. Paul. F. and G. Willius were neth Clark was recruited from the smaller First 75 Years partners in the 1856 incorporation of Capital Bank of St. Paul as the new pres­ Meyer & Willius, which duly evolved ident. Clark promptly brought in George into the National German-American Prince (whose brother Frank was then the Bank that merged in 1912 into the Mer­ senior banking officer of the First Na­ chants National Bank. The Merchants tional Bank in Minneapolis). Clark and had been founded in 1872 by and for St. Prince reorganized and revitalized the Paul merchants, and by supporting that Merchants Bank and, with their young protégé, Richard C. Lilly, soon became designated a United States depository in clientele, the bank prospered. By the end identified as the most aggressive of St. 1868 (a measure of size and quality of of the nineteenth century, the Merchants management). Hill made his proposal to was the second largest bank in St. Paul. Paul’s larger banks. Dean, who thought for a moment or so, Its longtime directors included Amherst The 1912 acquisition of the National then decided that this might be a good H. Wilder, Charles Bigelow, Crawford German-American Bank brought a num­ idea. On October 10, 1912, Hill person­ Livingston, and Frank B. Kellogg. ber of new directors and their related ally bought all of Second National Bank’s Although the Merchants had weath­ businesses to the Merchant’s board, in­ stock for $1,240,000, a premium over the ered the major banking crisis of 1893, it cluding Frederick E. Weyerhaeuser, book value of approximately $1 million. became clear by 1897 to its directors that Roger B. Shepard, Albert Lindeke, Carl

An Offer Not to Be Refused Hill now went back to First National to report what he had done and implicitly threatened to transfer all of his railroad and personal business from the First to the Second National. In a (relative) twinkling of an eye, First National’s shareholders understood the logic of Hill’s plan. In December, 1912, they agreed to sell the First to Hill for $3,350,000; at year-end the two banks were then consolidated into the First National Bank with Hill as the sole shareholder, except for the directors’ qualifying shares.1 Hill also purchased the First’s trust affiliate, the Northwest­ ern Trust Company, which oversaw many of his family affairs as well as those of others. Northwestern Trust even­ tually became an affiliate of the new First National with a state charter and a new name, the First Trust Company, i When Hill died in 1916 without leav­ ing a will, the ownership of the First Na­ tional Bank and the Trust Company i passed by statute one-third to his wife and two-thirds divided equally among his nine children. Louis W. Hill, James J.’s second son, who served as chairman of the First Bank’s board from 1915 to 1935 as well as chairman of the Great Northern Railway’s board, provided an Merchants National Bank at 366 Jackson Street, as it looked between 1906 and 1912. Com­ abstracted oversight to his family’s fi­ pleted in 1882, it still stands today as the M cColl building. Unless otherwise indicated, all pho­ nancial interests. tographs for this article are from the Minnesota Historical Society.

RAMSEY COUNTY HISTORY 5 Schuneman, Thomas Irvine, and Frank type of insurance for small depositors lican Party. Taft, the incumbent and the Schlick. In the early merger discussions, and some kind of reserve backing for the Republican nominee, received only 23 it was suggested that the name of the new banks. percent of the popular vote; Theodore institution be the Merchants German- The Banking Crisis of 1907 had been Roosevelt, a former Republican presi­ American National Bank, recognizing a long time brewing; loan demand was dent running as a Progressive, collected that the German-American Bank was, in high and the stock market was booming. 27 percent; and Woodrow Wilson, the fact, slightly the larger of the two part­ The U.S. Treasury was attempting to Democrat nominee, won the election ners. Frederick Weyerhaeuser stated manage bank credit by buying and selling with a 42 percent plurality, helping his flatly that “we are all Americans now” securities among six major New York party to win both houses of Congress. Al­ and the shorter name was adopted.2 City banks that were under pressure from most immediately, Senator Robert Owen There were two somewhat related foreign banks, from small correspondent and Congressman Carter Glass assumed Capital Banks in St. Paul, products of the banks across the United States, and from the role of draftsmen for a new structure late nineteenth century and survivors of the Treasury itself. When the Bank of that would be a combination of public several banking crises. The Capital Bank England moved to stop sales of gold and private appointments. James J. Hill & Trust failed in May, 1924, in what added to the balance of payments issue, weighed in on the side of opponents to would prove to be the city’s worst bank the New York banks cut off credit to their the new proposal: failure to the present date. Its sister orga­ U.S. correspondents. The reaction was One serious defect is that the bill will not nization, the Capital National Bank prompt and draconian. The stock market and cannot do what on its face it proposes to teetered dangerously but was saved from suffered a major decline, raw material do. It professes to aim at a comprehensive a similar fate by an immediate hasty prices collapsed and manufacturers started reform of currency and banking by estab­ merger into the Merchants National to shut down as they could not get cash to lishing a logical and permanent system. We Bank. The St. Paul financial community meet payrolls. The Treasury and the large have never had that since this government was loath to have a second failed bank in New York banks were quick to react to was founded. We shall not have it if this bill its midst and pressed for a speedy resolu­ the burgeoning panic and backed off; should become law.5 tion. The initial proposal for rescuing most of the potential damage was the Capital National was to have been a avoided, but it was quite clear that a Hill’s remarks were further extended in 50/50 venture between the Merchants Na­ major disaster had loomed and ebbed. As accord with the style of the times, but he tional and the First National. However, the one observer noted: concluded that the members of the Ameri­ First’s management dithered inconclu­ can Banking Association might be able to Somewhere in the banking system of a sively about the matter, so the Merchants help amend the proposed legislation and country there should be a reserve of lending National acted peremptorily and singly.3 that, if the new entity could not be power, and it should be found in its central By the middle of the 1920s, the five St. changed, they should consider escaping money market. . . . Provision for such re­ Paul banks that had survived the early the anticipated Federal Reserve net by serve power may doubtless be made in a decades of Minnesota banking to reach converting to state charters. number of different ways. This investigation 1900 had now shrunk to just two strong The final bill was signed into law in will have served its purpose if... it brings competitors; they in turn would merge in December, 1913, and provided, among home to the reader the need not only of this 1929 as a precursor to the creation of the other things, that: reserve power, but also the willingness to First Bank Stock Holding Company. use it in future emergencies.4 • There would be a Federal Reserve System headquartered in Washington, D.C. with We’re From the Government; While it seemed clear to everyone that up to twelve regional banks. We Want to Help You! “something” needed to be done, there However, a new player in the world of was, to no one’s surprise, no consensus • All national banks would be required to be banking had emerged—the Federal Re­ as to what or how. The private sector members. serve System. For centuries, banks had thought that a private concordat would •The Comptroller of the Currency would been subject to the great economic waves work, while the political debate insisted examine each member bank twice a year. that washed over commercial systems, and that only Congress had the wisdom and caused predictable but variable stresses on strength to manage the banking system. The law provided that there could be up banks. Without a system of protection, to twelve regional banks. The New York the small country banks and even their “Right after the Fire City financial district thought that one big city cousins could fail, and in failing, Department” bank—located on Wall Street—would be take with them the deposits of large and In 1912, the Republicans, possessors of a perfect. That location would naturally be small clients. The United States had Congressional majority as well as the absorbed into the New York private weathered the banking crises of the 1870s White House, were drafting legislation banking giants’ on-going dominance of and 1880s, and had been moderately that would have created a private sector the nation’s financial affairs. Grudgingly, shaken by the Panic of 1893, but Con­ entity. The three-way split of the 1912 “the Club” allowed that one or two addi­ gress and the press were calling for some elections, however, fractured the Repub­ tional banks might be accepted in, say,

6 RAMSEY COUNTY HISTORY the fullest extent to every reasonable de­ mand of legitimate business___At the same time, it wrecked the old system of reserve deposits which was a breeder of panic.7 As neither a fully public nor private orga­ nization, the stature of the Federal Re­ serve was both undefined and questioned. Secretary of the Treasury McAdoo went to President Wilson, who was also his fa- ther-in-law, and enquired about the rela­ tive rank of the Federal Reserve among Washington institutions. Wilson said “I can do nothing about it. I am not a so­ cial arbitrator.” “I know that, Mr. Presi­ dent” responded McAdoo “but they want you to decide.” “Decide what?” persisted Wilson. “Decide their rank” said McAdoo “in the scale of social precedence.” “Well,” said Wilson brightly, “they might come right after the fire department.”8

Upper Midwest Banking Difficulties The decade of the 1920s, with vacillating public policy expressions regarding Chicago and/or San Francisco. Treasury was strongly proposed as the specific Re­ branch banking and the steady drum-roll Secretary William Gibbs McAdoo and serve City for the Ninth District, but the of persisting difficulties in the agricul­ his working associate, Agriculture Secre­ city lacked a sufficiently well-positioned tural districts, contributed to basic con­ tary David F. Houston, however, listened advocate. Minneapolis already was per­ cerns that Minnesota bankers, rural and to the populist overtones of the enabling ceived as the more dynamic of the Twin city, shared about their collective future. legislation and decided to locate the full Cities and the logic of a strong banking In 1920, there were 3,551 banks in twelve banks in present and potential fi­ center and a more diverse business com­ the States of Minnesota, North Dakota, nancial centers across the country. This munity resulted in the latter city being South Dakota, and Montana. On the basis would serve, first, to prevent New York designated. of banking institutions per unit of popula­ City banks from totally dominating the There was no way to test the capabili­ tion, the Ninth Federal Reserve District national dialogue on banking and finance ties of the Federal Reserve System in was the most “over-banked” section of and, second, to encourage channeling of dealing with national financial crises the country.9 This proliferation was en­ communication about banking and busi­ until one arose. The concerns of Hill and couraged by optimism, lax banking laws ness conditions around the country to his peers about the potential effective­ and supervision, and by the nominal central policy makers. ness of the new Federal Reserve System amount of capital needed to organize a One of the criteria used in siting the were widely held in the private banking bank. One banker noted that “it actually district reserve banks was access to trans­ community. While the Fed would prove cost less to start a bank than it did to buy portation—read railroads—with the in­ to be considerably less than its founders a good farm.” Many of the small rural tent that the network should be designed had hoped in the Great Depression to banks were perennially stretched in pro­ in such a fashion that no member bank come, it also would prove that it could viding agricultural credit that could pre­ would be farther than an overnight train grow into a considerable influence in the dictably become long-term debt, while trip from the nearest reserve city.6 A United States banking system. As Carter they were always at the mercy of their sense of congruency made it logical that Glass observed, however, the old order city correspondent to make sufficient liq­ the Ninth Federal Reserve District would uidity available on a continuing basis. was gone: prove to be the territories served by Jim Historically, we have been given the Hill’s “Northern Lines” both east and The Federal Reserve Act revolutionized this general impression that the country suf­ west of the Twin Cities. The size of this wretched system by providing a reserve fered vast bank failures during the de­ district was such that a branch office was bank currency based on sound, liquid com­ pression of 1930-1935. To the contrary, established in Helena, Montana. St. Paul mercial paper, responsive at all times and to however, the great wave of bank failures

RAMSEY COUNTY HISTORY 7 began and accelerated during what was The NATIO NAL Bank of St. Paul was looking over its known as “The Roaring Twenties.” Bank shoulder at the Merchants National Bank failures in the Ninth Federal Reserve Dis­ whose aggressive staff was gradually but trict ballooned and continued throughout EXCHANGE surely narrowing the gap in size that sep­ the 1920s as follows: B AN K in St. TauJ arated the two entities.

Year Failed Banks Just a Family Affair 1920 35 Louis W. Hill, chairman and, he thought, 1921 73 controlling shareholder of the First in St. 1922 64 Paul, was surprised in November, 1927, 1923 279 by a report from his friends at St. Paul’s 1924 295 Kalman & Co, a regional brokerage 1925 168 house, that Blair & Company was look­ 1926 283 ing for blocks of stock in the First Na­ 1927 142 tional. Blair was a well-regarded Wall The “smallish” National Exchange Bank, 1928 94 Street firm and the story was that they saved from failure in 1926. had been commissioned to dig out a di­ 1929 84 versified portfolio of strong bank stocks for “an Eastern Estate wishing to diver­ Total failures during the decade, ad­ sify their portfolio of bank stocks.”10 justed for a few banks that were reorga­ Blair was looking for blocks of 1,000 nized, recapitalized and reopened, were combined to restore solvency to the small shares or more. The directors of the First 1,198, almost one for each three hanks bank, which was then authorized to re­ took notice of this exploratory enquiry open in the Ninth District at the beginning open on the Monday morning following and voted to send a letter to their rela­ of 1920. Although the Federal Reserve its closure on the preceding Friday. The tively few shareholders (mostly directors System was well aware of the difficulties resurrected bank opened under a new with qualifying shares) asking for a first facing the banking system in the Ninth name, the Empire National Bank of St. refusal against any prospective offer. District and the nation, it was neither in­ Paul. Primary investors in the recapital­ Then the bigger scheme began to unfold, clined nor empowered to act in any way to ized bank included Louis W. Hill and a scheme that could—nay, was intended alleviate the stresses that were becoming brewer Jacob Bremer (who had built his to—take ownership of the First National increasingly apparent. The Fed did send own regional banking group). David out of Minnesota. bankers a series of “letters of concern” Shepard, who had been a vice president It was noted earlier that James J. Hill about speculative lending practices, but of the First National Bank of St. Paul, be­ died without a will. The result of this the central bank and the country bank held came the first president of the new Em­ omission was that his assets were distrib­ widely differing definitions of “specula­ pire. These “good Samaritan” invest­ uted by state law—one-third to his tive.” The local banker believed that his ments were handsomely repaid in 1930 widow Mary and the balance split among agriculturally-based lending was essen­ when the Empire became Northwest Hill’s children. There were nine of these tial, not speculative—at least as long as he Bancorporation’s small window in the St. children: three sons with widely varied received timely payments of both princi­ Paul market. lifestyles and six daughters, all of whom pal and interest when they were due. were married. Four of these sisters lived Nearing the end of the 1920s, the First Holding Companies? in New York City and a fifth, named National and the Northwestern National It’s easy to assume that by 1927, there Mary after her mother, was a recluse in Banks in Minneapolis had brought some were at least preliminary thoughts in the Massachusetts. Louis W. Hill, the second stability to their immediate market area, heads of the senior managers of the son, stayed near home and took care of but both were highly concerned about the Northwestern National Bank of Min­ his mother’s estate when she died in potential for further trouble among their neapolis about the potentials in creating 1923. country correspondents. Banks in St. their own regional bank holding com­ “L.W.” sat as chairman of the board of Paul had not been significantly involved pany. It is equally probable, however, the Great Northern Railroad and also in branch office concerns, nor were they that the officers of their principal com­ served as chairman of the board of the as broadly committed to the universe of petitors in both St. Paul and Minneapolis First National Bank of St. Paul. The First country bankers. One local banking diffi­ had no similar ideas in mind. The First National had 30,000 shares of capital culty in St. Paul, the failure of the small­ National Bank in Minneapolis was busy stock outstanding, with all but a few ish National Exchange Bank in 1926, had both with an array of Minneapolis offices shares still owned by all of the Hill heirs. been resolved as a joint venture between and branches and with an extensive net­ The way the mathematics of distribution the First National of St. Paul and the work of troubled correspondent banks worked out, the controlling majority of Merchants Bank. The two organizations across the territory. The First National the bank’s equity was held by the daugh-

8 RAMSEY COUNTY HISTORY ters living in the East. These women had Blair offer and of the interest of the Hill no great affection or respect for their sisters in selling, L. W. Hill and Everett brother Louis, whom they believed had Bailey, chairman of the executive com­ treated their interests with less than mittee of the First National’s board and a brotherly concern; further, they were former president, took counsel with C. O. concerned by the lack of growth and Kalman, a St. Paul financier and a long­ nominal return on the bank investment. It time confidant of Hill. Louis had pen­ was not surprising that they were suscep­ ciled up the share totals12 and realized to tible to an apparently reasonable offer to his surprise that the sum of his siblings’ buy their stock. holdings was sufficient to convey control The sisters had been particularly upset of the bank, despite the stock that he when L.W. convinced his mother that the owned personally and that in his mother’s North Oaks Farm was an unprofitable in­ estate. Hill and Kalman then took two ex­ vestment for the family and that he might peditious steps: First, Hill convinced his take it off her hands. She was so con­ older sister Mary and his younger brother vinced by these arguments about the lack Walter to give him a short-term option on of potential for North Oaks that she gave their shares, with a promise to see that Louis W. Hill. Photo from the Louis W. Hill Louis several hundred thousand dollars they would fare better working with him Papers, Jam es J. Hill Library, St. Paul. to help defray the costs of that substantial than in the Blair offer. piece of real estate. Several of the sisters With Hill holding these options, Blair were upset enough to sue their brother could no longer acquire enough stock to Minneapolis. In the East, Marine Mid­ and suggested that he had used undue in­ win control. With the control issue ren­ land, an established bank holding com­ fluence. They lost the suit. dered moot, Hill and Kalman then pro­ pany located in upstate New York, had Blair’s offer to Hill’s daughters was posed to Blair that they assume a 50 publicly stated its intentions to expand for as many as 18,000 shares (60 percent percent interest in the underwriting. See­ outstate. Besides the risk that one or more of the total equity) for $285 per share or ing that control of the First was out of of the larger Twin Cities banks might get roughly $600,000 for each daughter’s in­ reach without a messy legal action, Blair picked off, there was also the possibility terest. Anson Beard, married to Ruth agreed to their participation. It was an that one of the large, stalwart, and Hill, was the primary contact with Blair easy choice for Blair with the realization friendly banks in the surrounding states and served as spokesperson for all of the that this would mean a quicker and surer could be acquired as part of someone Eastern sisters. Anson had small patience profit, although probably less than that else’s expansion plans. with his brother-in-law Louis, and enthu­ which the control opportunity might have siastically urged acceptance of the Blair produced. Rationale of Fear and Greed offer. Beard was a man of short temper, Mary and Walter Hill, as loyalists to The final motivation for creating the easily exasperated. When no progress ap­ their brother Louis, ultimately received “Minnesota Twins,” the Minnesota-based peared to the Blair offer, Anson sent $300 per share for their holdings; Blair’s holding companies—first Northwest Louis a telegram that reflected his temper share of the purchased stock was reof­ Bancorporation and on its heels the First and his interest in closing the deal before fered in New York, Chicago, and locally Bank Stock Group, moving defensively— the end of 1927: in the Twin Cities at $350 per share. As was a classic combination of enlightened his share of the transaction, Hill had re­ self-interest and fear. Enlightened self- I SUGGEST THAT YOU AND OSCAR gained personal control over the bank. interest was the prospect of creating KAHLMAN (sic) PARTICIPATE IN an owned satellite network of banks BLAIR SYNDICATE NO DESIRE TO What About a Holding throughout the service territory. Such a ELIMINATE EITHER OF YOU WILL Company? network could blanket the region and ASK BLAIR IF YOU WISH AND AM The first rumors of the Blair offer and the transcend the challenges of working with SURE THEY WILL WELCOME YOUR subsequent reality was a jolt to the local poorly financed, weakly managed corre­ PARTICIPATION CONTRACT READY business community; here was an eastern spondents. The motivations of fear were TO EXECUTE . . . MINIMUM TEN opportunist making a bold and nearly somewhat more complex and included THOUSAND SHARES ANY AMOUNT sufficient offer to buy one of the four fear of the possible state of federal gov­ ABOVE TEN THOUSAND NO STRINGS largest banks in the Twin Cities. It was ernment regulation and/or other interfer­ TO OFFER WHY DON’T YOU AND common knowledge on “the Street” that ence that might make future joint actions KAHLMAN STOP PROCRASTINATING A.P. Giannini and his Bank of Italy were difficult or impossible. There was fear AND PLAY BALL WITH REAL PEOPLE interested in buying banks as an expan­ that the Federal Reserve System, as yet BLAIR CONNECTION WILL BE BENE­ sion from his California base, and that he untested in any way, might fail in any ef­ FICIAL TO BANK AND YOUR CITY11 had, in fact, made some modest purchase fort to sustain the banking system in Having been advised of the scope of the of shares in the First National Bank of times of national need. Finally, there was

RAMSEY COUNTY HISTORY 9 identified a number of prospective affili­ ates among his customers. The proposed modus opemndi would be to offer an ex­ change of “Banco” $50 par value com­ mon stock for the shares of the banks to be acquired. Any stock offer also could be supplemented with a partial cash offer to satisfy those selling stockholders who either did not approve of the acquisition or chose not to accept the tax savings of a stock offer. Decker was the identified spokesman for the venture and used his sales ability and energy to make it happen. The first group of banks to be con­ tacted—under extremely confidential conditions—in preliminary dialogue were all outside Minnesota. With the frequent E d w ard W. D e cker and unexpected changes in state and fed­ eral regulations affecting branching and group ventures, Banco wanted to estab­ lish bridgeheads across state lines as soon [presumably the Merchants National Bank] as possible. Thus the exploration began would likely to at once have the opportunity, with the First National Bank and Trust and our second choice would be the First Savings teller at First National Bank. Company in Fargo, North Dakota, the Minneapolis for the next grouping, which First National Bank of Mason City, Iowa, would not be as favorable for us. and the National Bank of La Crosse, As I understand it, the plan is not a con­ a paranoidal fear that eastern or western Wisconsin. Each of these banks ex­ solidation and does not affect the directors dogs might want to get in the local pressed interest in the new venture. Then or management, but contemplates forming a mangers that were proving to be so ad­ Decker, just before Christmas, 1928, holding company which would hold a ma­ vantageous to these regional bank man­ made an appointment with Louis W. jority of stock in various banks. This holding agers. While this generation was still Hill: he came to St. Paul to see if Hill company to be controlled by a voting trust in trained to maintain a primary fiduciary would support the addition of the First which St. Paul and Minneapolis would have duty to the depositor, rather than the National Bank to the new venture. Hill equal representation. This is more appealing shareholder, an emerging secondary mo­ was unexpectedly open to the suggestion to me than any form of consolidation would tivation of making money as individuals and wrote a letter to Cyrus Brown, presi­ be and would, in my opinion, strengthen our was not seen as evil; and, at times, a mod­ dent of the bank, with his interpretation institution in the entire country as well as erate greed on the part of bank owners of the suggested parameters: our Northwest territory. certainly expedited creation of the hold­ . . . I have refrained from seeing Mr There is an important matter which has ing companies. Decker and I know he understands I am come up recently and I only know of it in a waiting for an opportunity to go over it with general way and have not gone into it in de­ Go You Northwestern! you. If we decide to go ahead, of course, tail, as I want to get your judgment and opin­ Edward W. Decker, president of the there are a lot of details to be worked out. ion on it before committing myself, al­ Of course, if any deal is made, I am as­ Northwestern National Bank of Min­ though in principle it seems very sound and suming that it will be on a basis fair to our neapolis, a large and healthy regional logical to me, and quite advantageous to our institution.13 bank with a strong correspondent bank­ institution—giving St. Paul greater advan­ ing clientele, was in a unique position in tage than I supposed we could obtain in such The letter reflects the spirit of the times 1928 to start a holding company. Decker a situation. as well as the working rationale for the was a man of considerable vision who, Mr E.W. Decker is convinced that, with Banco plan as it applied to Hill and the assisted by others among his bank’s consolidations going on as they are in New First National Bank. As noted, Hill was management—certainly including J. York, Chicago, St. Louis, San Francisco, initially taken by the proposal and dis­ Cameron Thomson, David West and and in practically all financial centers, we cussed it with others of his confidantes, Henry J. Thrall, Jr.—determined the must expect it here, and he wants to take ad­ including Ralph Budd, president of the form of the proposed corporation. Robert vantage of the situation by getting the choice Great Northern Railroad, and Oscar Macgregor, head of Northwestern’s Cor­ of the field for his associates, and if we do Kalman, the investment banker. Both respondent Bank Department, had long not join, it is natural that our next competitor were directors of the bank. He also asked

10 RAMSEY COUNTY HISTORY the owner and the publisher of the St. Paul Dispatch, the city’s evening news­ paper, what they thought, and received their response by letter on the day after Christinas:

I fear that we have left you under the impres­ sion that we were in accord with your thought that it would be a good thing for St. Paul for this merger to go into effect. The plan which you outlined... of plac­ ing the stock in a trust agreement under which the representatives of the St. Paul institution would always have an equal vote . . . appeared to be a satisfactory solution, but we have since secured an opinion from our counsel that the Courts have held... that such an agreement can be upset at any time by the majority interest. . . It would there­ fore seem to us that if this plan went into ef­ fect, control would rest with the institution having a controlling stock interest, which in this case would be the Northwestern Na­ tional Bank of Minneapolis. While we realize that this is not a matter of interest to the stockholders of the bank who are involved in this plan, it is a serious matter to the city of St. Paul. The stockhold­ ers of the bank may well view it as a per­ sonal institution, but we cannot help but feel that the influence on the prosperity of the city, which is wielded by its largest banking institution, is so great that its ownership be­

comes a matter of public interest and should Merchants National Bank, right, and First National Bank, together, as they looked in the largely be vested in the hands of people who 1950s. Photo from The First Through a Century by Frank P. Donovan, Jr., and Cushing F. have the best interest of St. Paul at heart. Wright, published in 1954. The fact that the First National Bank of St. Paul is its largest banking institution is an evidence of the confidence which the citi­ zens of St. Paul have had in the ownership others, and reached a decision over the There is no doubt that George Prince and and management of the bank. We do not be­ holiday week. A letter dated January 2, Richard Lilly at the Merchants National lieve that this confidence should now be 1929, to Ralph Budd concluded the over­ Bank were aware of this brief but porten­ capitalized for dollars to the detriment of the ture (but not the concerto that followed): tous courtship; their reactions must have very people who have made it possible. included several combinations of conster­ We are firmly convinced that it would I am obliged to you for your note regarding nation at the proposal and elation at the not be for the best interests of the city of St. the conversation you had with Mr Owens of outcome. Abortion of Decker’s proposal Paul to have its largest banking institution the Dispatch as to the bank situation. I have would now give them an opportunity to pass into control of Minneapolis bankers, learned that the matter is not likely to pro­ create their own regional banking history. and therefore we think it is only fair that we ceed any further at present so I do not be­ Less than a week later, on January 8, should let you know in advance that we will lieve we will be further embarrassed by re­ 1929, the Northwestern National Bank of vigorously oppose the consummation of this quests for statements. I think the press was Minneapolis announced the incorpora­ plan.” 14 very considerate in having withheld the mat­ tion of Northwest Bancorporation, with A copy of this letter was sent to E. W. ter as long as they did. As it appears now, initial membership including the banks in Decker. Hill took the response from the nothing may come of it, so I think it is much Minneapolis, Fargo, and Mason City. Dispatch to heart, along with the advice better that they did not make any guesses at From this point, Banco moved rapidly he received from Kalman, Brown and it.”15 ahead adding regional banks in Montana,

RAMSEY COUNTY HISTORY 11 Hill would continue to hold the nomi­ Endnotes nal position of chairman of the board but 1. The FIRST through a Century, Donovan & his authority would also be nominal. This Wright, Webb Publishing, 1954: p. 43 et seq. was reflected in a letter to an old banking friend in Boston. The latter had written 2. Ibid., p. 72. Hill when the new management of the 3. Ibid., p. 78. First National closed its correspondent 4. OMW Sprague, History o f Crises under the Na­ banking account with the First National tional Banking System, Government Printing Of­ Bank of Boston and had asked for Hill’s fice, 1910: p. 319. intercession. Hill responded that new man­ 5. James J. Hill Industry, Credit and Banking, an agers were in charge, that they had not con­ address before the American Bankers Association, sulted him, and that there was “nothing, in Boston, MA, October 9,1913. their opinion, which a bank in Boston 6. Carl H. Moore, The Federal Reserve System, could do for the First of St. Paul.”17 McFarland & Co, 1990: p 14 7. Carter Glass, An Adventure in Constructive Fi­ Epilogue nance, Doubleday & Co., Inc. 1927. On January 29, 1929, the $10 million 8. Moore, Federal Reserve System, p. 32. merger of the two St. Paul banks was an­ Richard C. Lilly 9. Charles Sterling Popple, Two Bank Groups in nounced along with a notice that the the Central Northwest, Harvard University Press, combined banks would build a new of­ 1944: p. 57. fice tower next to the existing Merchants 10. Louis W. Hill papers, James J Hill Library, St. National Bank facility to house their Paul. South Dakota, and Wisconsin, as well as combined operations. Cy Brown retired 11. Telegram dated November 27,1927, Louis W. other banks in the original core states. and the Prince/Lilly management took Hill papers. Although Northwest Bancorporation over. Though fully engaged in combining 12. Longhand pencil tabulations in the Louis W. had a running start in the assemblage of a the two banks and in building a tower Hill papers. regional bank holding company—a run­ that continues to be a St. Paul skyline 13. Letter to Cyrus P. Brown, December 12,1928 ning start in terms of necessary planning landmark, these men also were thinking —Louis W. Hill papers. and design of a strategy to attract and about the bigger picture. capture the region’s leading banks—the By the end of March, the officers of 14. L. E. Owens letter to Kalman, December 26, 1928— Louis W. Hill papers. people who put the First Bank Stock the First National Banks in Minneapolis Group together were able to react and re­ and St. Paul were deep into the plans for 15. Louis W. Hill to Ralph Budd, January 2, 1929 —Louis W. Hill papers. spond with remarkable celerity. George a new holding company and on April 1, Prince and Richard Lilly were in contact 1929, less than ninety days after Banco’s 16. Louis Hill penciled notes on balance sheet of with Louis Hill immediately after his announcement of incorporation, the First First National Bank, June 14,1927. The three rail­ road deposits were $13.2 million or 22 percent of turndown of the Banco proposal with a Bank Stock Investment Company was the bank’s deposits. Louis W. Hill papers. plan of their own. In a move that fore­ ready to go. 17. Ibid. shadowed a transaction almost seventy None of these ambitious bankers had years later in the FBS/US National Bank working crystal balls, and no clouds ap­ merger, they proposed that the slightly peared to warn of the dreadful times that smaller Merchants National Bank ac­ would have an impact on the next decade. quire the First National Bank of St. Paul The two holding companies would be and continue the combined venture under able to boast that no member of either the name of the First. Hill was totally en­ group would fail, although there would thusiastic about this proposal (for years be moments of uncertainty. The history he had regularly tracked two sets of bank of “the Minnesota Twins” is just begin­ numbers); the percentage of the First Na­ ning at the close of this essay, but the tional’s deposits represented by “his” prelude to that history is a rich quilt of railroad accounts,16 and the comparative people and events. totals of loans, deposits, and capital of the Merchants Bank. He was well aware G. Richard Slade is a member o/Ramsey that the smaller bank was steadily nar­ County History’s Editorial Board. This rowing the gap in size and, although it narrative is excerpted from his book, The was still smaller, it was more aggressively Minnesota Twins, a Story of Regional managed. The proposed 50/50 ownership Banking, to be published later this year split was acceptable to him.17 by the Afton Historical Society Press.

12 RAMSEY COUNTY HISTORY Griffin Stadium Scoreboard and Signage. See excerpts from Jimmy Griffin’s memoir begin­ n in g on p a g e 13.

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